Category: CHAPTER II – The Taxes (ITA)

“Debt benefit” definition of section 19 of ITA

Posted on by admin_kmos

‘debt benefit’, in respect of a debt owed by a person to another person, means-

(a)     in the case of an arrangement described in paragraph (a) (i) of the definition of ‘concession or compromise’, the amount cancelled or waived;

(b)     in the case of the extinction of that debt by means of an arrangement described in paragraph (a)(ii) of the definition of ‘concession or compromise’, the amount by which the face value of the claim in respect of that debt held by the person to whom the debt is owed prior to the entering into of that arrangement exceeds the expenditure incurred in respect of-

(i)      the redemption of that debt; or

(ii)     the acquisition of the claim in respect of that debt;

(c)     in the case of the settling of that debt by means of an arrangement described in paragraph (b) of the definition of ‘concession or compromise’, where the person who acquired shares in a company in terms of that arrangement did not hold an effective interest in the shares of that company prior to the entering into of that arrangement, the amount by which the face value of the claim held in respect of that debt prior to the entering into of that arrangement exceeds the market value of the shares acquired by reason or as a result of the implementation of that arrangement; or

(d)     in the case of the settling of that debt by means of an arrangement described in paragraph (b) of the definition of ‘concession or compromise’, where the person who acquired shares in a company in terms of that arrangement held an effective interest in the shares of that company prior to the entering into of that arrangement, the amount by which the face value of the claim held in respect of that debt prior to the entering into of that arrangement exceeds the amount by which the market value of any effective interest held by that person in the shares of that company immediately after the implementation of that arrangement exceeds, solely as a result of the implementation of that arrangement, the market value of the effective interest held by that person in the shares of that company immediately prior to the entering into of that arrangement;

[Definition of “debt benefit” substituted by section 36 of Act 23 of 2018 effective on 1 January 2018, applies in respect of years of assessment commencing on or after that date]

“Developer” defintion of section 13quat of ITA

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“developer” means a person who erects, extends, adds to or improves a building or part of a building-

 

(a)     with the sole purpose of disposing of that building or part thereof immediately after completion of that erection, extension, addition or improvement; and

 

(b)     disposes of the building or part of a building within three years after completion of that erection, extension, addition or improvement;

“Purchase price” definition of section 13quat of ITA

Posted on by admin_kmos

‘purchase price’ in relation to any building or part of a building purchased by the taxpayer means the lesser of –

 

(a)     the actual cost to the taxpayer to purchase that building or part; or

 

(b)     the cost which a person would have incurred had that person purchased that building or part under a cash transaction concluded at arm’s length on the date on which that taxpayer purchased that building or part;

Section 13quin (ITA) – Deduction in respect of commercial buildings

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13quin.     Deduction in respect of commercial buildings

 

(1)     There shall be allowed to be deducted from the income of the taxpayer an allowance equal to five per cent of the cost to the taxpayer of any new and unused building owned by the taxpayer, or any new and unused improvement to any building owned by the taxpayer, if that building or improvement is wholly or mainly used by the taxpayer during the year of assessment for purposes of producing income in the course of the taxpayer’s trade, other than the provision of residential accommodation.

  

(1A)  For the purposes of this section, if a taxpayer completes an improvement as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost to the taxpayer of any new and unused building or of any new and unused improvement to a building contemplated in subsection (1).

  

(2)     For the purposes of this section the cost to a taxpayer of any building or improvement shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if he had acquired, erected or improved the building under a cash transaction concluded at arm’s length on the date on which the transaction for the acquisition, erection or improvement of the building was in fact concluded, have incurred in respect of the direct cost of the acquisition, erection or improvement of the building.

 

(3)     Where any building or improvement in respect of which any deduction is claimed in terms of this section was during any previous financial year brought into use for the first time by the taxpayer for the purposes of any trade carried on by such taxpayer, the receipts and accruals of which were not included in the income of such taxpayer during such year, any deduction which could have been allowed in terms of this section during such year or any subsequent year in which such asset was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during such previous year or years as if the receipts and accruals of such trade had been included in the income of such taxpayer.

 

(4)     No deduction shall be allowed under this section in respect of any building that has been disposed of by the taxpayer during any previous year of assessment.

 

(5)     No deduction shall be allowed under this section in respect of the cost of a building or improvement if any of that cost has qualified or will qualify for deduction from the taxpayer’s income as a deduction of expenditure or an allowance in respect of expenditure under any other section of this Act.

 

(6)     The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any building or improvement shall not in the aggregate exceed the amount of such cost.

 

(7)     For the purposes of subsection (1), to the extent that the taxpayer acquires a part of a building without erecting or constructing that part-

 

(a)     55 per cent of the acquisition price, in the case of a part being acquired; and

 

(b)     30 per cent of the acquisition price, in the case of an improvement being acquired,

 

is deemed to be the cost incurred by that taxpayer in respect of that part or improvement, as the case may be.

Section 13sex (ITA) – Deduction in respect of certain residential units

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13sex.     Deduction in respect of certain residential units

 

(1)     Subject to section 36, there must be allowed to be deducted from the income of a taxpayer an allowance equal to five per cent of the cost to the taxpayer of any new and unused residential unit (or of any new and unused improvement to a residential unit) owned by the taxpayer if-

 

(a)     that unit or improvement is used by the taxpayer solely for the purposes of a trade carried on by the taxpayer;

 

(b)     that unit is situated within the Republic; and

 

(c)     the taxpayer owns at least five residential units within the Republic, which are used by the taxpayer for the purposes of a trade carried on by the taxpayer.

 

: Provided that if a taxpayer completes an improvement as contemplated in section 12N, the expenditure incurred by the taxpayer to complete the improvement shall be deemed to be the cost to the taxpayer of any new and unused residential unit (or of any new and unused improvement to a residential unit), for the purposes of this section

 

(2)     There shall be allowed to be deducted from the income of the taxpayer an additional allowance of five per cent of the cost of a low-cost residential unit of a taxpayer for a year of assessment if deductions are allowable to that taxpayer in respect of that unit in terms of subsection (1) during that year of assessment.

 

(3)     For the purposes of this section, the cost to the taxpayer of a residential unit (or an improvement thereto) shall be deemed to be the lesser of the actual cost to the taxpayer or the cost which a person would, if that person had acquired or improved the residential unit under a cash transaction concluded at arm s length on the date on which the transaction for the acquisition of the new and unused residential unit (or of the new and unused improvement to the residential unit) was in fact concluded, have incurred in respect of the direct cost of the acquisition or erection of the residential unit or improvement.

 

(4)     Where any residential unit (or an improvement to the residential unit) in respect of which any deduction is claimed in terms of this section was during any year of assessment used by the taxpayer for the purpose of any trade carried on by that taxpayer, the receipt and accruals of which were not included in the income of that taxpayer during that year, any deduction which could have been allowed in terms of this section during that year or any subsequent year in which that residential unit (or an improvement to the residential unit) was used by the taxpayer shall for the purposes of this section be deemed to have been allowed during that previous year or those years as if the receipts and accruals of that trade had been included in the income of that taxpayer.

 

(5)     No deduction shall be allowed under this section in respect of the cost of any residential unit (or an improvement to a residential unit) that has been disposed of by the taxpayer during any previous year of assessment.

 

(6)     No deduction shall be allowed under this section in respect of the cost of a residential unit (or an improvement to a residential unit) if any of the cost has qualified or will qualify for deduction from the taxpayer’s income as a deduction of expenditure or an allowance in respect of expenditure under any other section of this Act.

 

(7)     The deductions which may be allowed or deemed to have been allowed in terms of this section and any other provision of this Act in respect of the cost of any residential unit (or any improvement to a residential unit) shall not in the aggregate exceed the amount of such cost.

 

(8)     For the purposes of this section, to the extent that the taxpayer acquires a residential unit (or improvement to a residential unit) representing only a part of a building without erecting or constructing that unit or improvement-

 

(a)     55 per cent of the acquisition price, in the case of the unit being acquired; and

 

(b)     30 per cent of the acquisition price, in the case of the improvement being acquired, is deemed to be the cost incurred by that taxpayer in respect of that unit or improvement, as the case may be.

Subsection 2A of section 20 of ITA

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(2A)  In the case of any persons other than a company-

(a)     the provisions of subsections (1) and (2) shall mutatis mutandis apply for the purpose of determining the taxable income derived by such person otherwise than from carrying on any trade, the reference in subsection (1) to “taxable income derived by any person from carrying on any trade” and the reference in that subsection to “the income so derived” being respectively construed as including a reference to taxable income derived by that person otherwise than from carrying on any trade and a reference to income so derived; and

(b)     the said person shall, subject to the provisos to subsection (1), not be prevented from carrying forward a balance of assessed loss merely by reason of the fact that he has not derived any income during any year of assessment.

[Subssection (2A) amended by section 15 of Act 65 of 1973 and section 19 of Act 8 of 2007 and substituted by section 39 of Act 15 of 2016 effective on 19 January 2017]

Section 23(n) of ITA

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(n)     any deduction or allowance in respect of any asset or expenditure to the extent that amount –

 

(i)      is granted or paid to the taxpayer and is exempt from tax in terms of section 10(1)(yA); and

 

(ii)     is so granted or paid for purposes of the acquisition of that asset or funding of that expenditure: Provided that the provisions of this paragraph shall not apply if the grant or payment is in respect of programmes or schemes that the Minister has identified by notice in the Gazette for purposes of this paragraph;

Section 23(o) of ITA

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(o)     any expenditure incurred –

(i)      where the payment of that expenditure or the agreement or offer to make that payment constitutes an activity contemplated in Chapter 2 of the Prevention and Combating of Corrupt Activities Act. 2004 (Act No. 12 of 2004);

[Subparagraph (i) amended by section 39 of Act 23 of 2018 effective on 1 April 2019, applies in respect of years of assessment commencing on or after that date]

(ii)     which constitutes a fine charged or penalty imposed as a result of an unlawful activity carried out in the Republic or in any other country if that activity would be unlawful had it been carried out in the Republic; or

[Subparagraph (ii) amended by section 39 of Act 23 of 2018 effective on 1 April 2019 and applies in respect of years of assessment commencing on or after that date]

(iii)     which constitutes fruitless and wasteful expenditure as defined in section 1 of the Public Finance Management Act and determined in accordance with that Act;

[Subparagraph (iii) added by section 39(1) of Act 23 of 2018 and substituted by section 11 of Act 20 of 2022]

[Paragraph (o) added by section 28(1)(e) of Act 31 of 2005 and amended by section 47(1)(a) of Act 24 of 2011 effective on 1 March, 2012 and applicable in respect of policies ceded on or after that date]

Section 23(p) of ITA

Posted on by admin_kmos

(p)      the value in respect of any cession of a policy of insurance ceded by a taxpayer to-

 

(i)      any-

 

(aa)    employee (or former employee);

 

(bb)   director (or former director); or

 

(cc)    dependant or nominee of the employee (or former employee) or director (or former director),

 

of the taxpayer; or

 

(ii)     any pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund for the benefit of any-

 

(aa)    employee (or former employee);

 

(bb)   director (or former director); or

 

(cc)    dependant or nominee of the employee (or former employee) or director (or former director),

 

of the taxpayer;